Title PART 74.pdf ✅

The Economist April 8th 2023 49 International Hitting the books Useless studies I s university worth it? That question once seemed a no­brainer. For decades young adults in rich countries have flocked to higher education. Governments have touted college as a boon for social mobility and economic growth. Yet as fees rise and graduate earnings stagnate, disillusion- ment is growing. A poll published by the Wall Street Journal on March 31st suggests a crisis of confidence has worsened: 56% of Americans now believe a degree is no lon- ger worth the time and money spent on it. For an average undergraduate, at least, this is not consistent with the facts. In most places, for most learners, the finan- cial returns to higher education remain ex- tremely healthy. Yet undertaking a degree has become riskier. The rewards for the best performers are increasing, but a trou- blingly high share of students see negative returns from their studies. New data sets, such as tax records, are illuminating this dispersion like never be- fore. They can track how much students taking specific courses, at specific institu- tions, earn in later life. In time that detail will help students avoid the worst pay­offs and seize the best. Choice of subject and timely graduation matter hugely; choice of institution somewhat less so. It could also be useful to governments tempted to crack down on “low­value degrees”. A boom in graduate earnings began in the 1980s in the rich world. Back then the difference between the salaries of people who gain at least a bachelor’s degree and those who do not—commonly called the “college­wage premium”—began to soar. In the 1970s an American with a university education was earning on average 35% more than a high­school graduate. By 2021 that advantage had risen to 66%. Recently the wage premium in many countries has either stagnated or begun to fall. And in places that actually charge stu- dents for their degrees, costs have gone up. Tuition in England has soared from noth- ing in the late 1990s to £9,250 ($11,000) a year, the highest in the rich world. In America, the out­of­pocket fee paid by an average bachelor’s­degree student in- creased from $2,300 a year in the 1970s to some $8,000 in 2018, in real terms, accord- ing to Jaison Abel and Richard Deitz at the New York Federal Reserve. (Students at public universities often pay less; those at private non­profits can pay a lot more.) Yet the average degree remains valu- able. In 2019 Mr Abel and Mr Deitz estimat- ed the annual financial return on the mon- ey that a typical American invests in a bachelor’s degree. They conclude that the typical rate of return for a bachelor’s degree is around 14%. That has dropped from a peak of 16% in the early 2000s. But it is still high. And it is well above the 8­9% that American graduates were recouping in the 1970s, before graduate wages, and tuition fees, began to soar. These calculations in- clude not only fees but also the money in- dividuals might expect to earn if they were working full­time instead. The average hides a very wide range of outcomes, however. Until recently econo- mists seeking to identify the winners and losers were mostly limited to surveys. The trend now is for governments, such as those of Britain and Norway, to proffer hef- ty, anonymised databases showing actual earnings for millions of university­goers. That makes it much easier to compare peo- ple like­for­like. The disaggregated data re- veal that a high share of students graduate with degrees that are not worth their cost. In England 25% of male graduates and 15% of female ones will earn less money over their careers than peers who do not get a degree, according to the Institute for Fiscal Studies (IFS), a research outfit. America has less comprehensive data but has begun publishing the share of students Crunching the puny financial benefits of many university courses 012